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Thursday, January 25, 2007

Targeting Competitors Misses the Point

Pundits love to talk about market share and often assume that Yahoo is targeting Google and vice versa, but that strategy never works. A paper by Wharton marketing professor J. Scott Armstrong shows that focuses on competitors instead of profits is a losing proposition. The paper "Competitor-oriented Objectives: The Myth of Market Share" provide real world and laboratory data proving that market share should not be a company goal.

Companies that established objects aimed at stealing market share actual hurt profitability, according to the study.

"All of the correlations between competitor-oriented objectives and profits were negative, ranging from minus 0.28 to minus 0.73," the study says.

A recent example is Sony and Microsoft, which are going at each other in the console wars, while Nintendo has become the most profitable of the three.

This article is a good reminder that profitability, not bragging rights, is the endgame.

By John Gartner at 06:34 PM | Comments (0)

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